People hate the stock market, and that might not change for 'decades'

Samuel L. Jackson in "The Hateful Eight"
Andrew Cooper/The Weinstein Company
People just don't like the stock market, and they probably won't for a long time.

Since the end of the financial crisis, individual investors have invested nearly nothing in the stock market in aggregate. Individual investors may be suffering a crisis of confidence, and retail buying may not be coming back any time soon.

"Look, it took over a decade of incredibly high dividend yields to bring people back to the stock market after the Great Depression," Mike Thompson, head of S&P Global Market Intelligence's Investment Advisory Services told Business Insider.

"It's going to take years and years to get average investors back into stocks this time."

"Since the end of the financial crisis in 2009, our view has been that it's going to take decades, not months or years, for individual investors to fully trust the market again," said a note circulated by Bespoke on Wednesday.

"This view has certainly played out during the current bull market, because over the last seven years we have yet to see any individual investor sentiment readings turn excessively bullish."

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Bespoke came to the conclusion by measuring the difference in the proportions of bullish institutional and individual investors in Yale's investor sentiment survey. Since the middle of the last decade, individual sentiment has generally run below that of institutions, meaning wealthy individual investors are more worried about the market than large scale fund managers.

"It appears that all of the lost money from the Dot Com bubble and the Financial Crisis has permanently scarred a generation of individual investors, and only time and a new generation will be able to change this dynamic," said the note.

In Bespoke's assessment, this is a phenomenon that could persist until the old guard gives way to investors that have fewer traumatic memories of the crisis. According to Thompson, it won't be quite as hard as that, but a long period of stock price growth along with serious incentives similar to the dividend growth seen after the Great Depression would be needed.

Either way it seems that mom and pop investors are wary of dipping their toes in the stock market waters, and it's unlikely they are going to be taking a dip any time soon.